By Emily Bary
Palo Alto Networks, CrowdStrike shares rally in wake of Zscaler's upbeat announcement
Shares of Zscaler Inc. were rocketing 20% in morning trading Monday after the cybersecurity company said that it expects to report better-than-anticipated results for its just-completed quarter.
Zscaler (ZS) now expects that it will record $415 million to $419 million in revenue for the April period, its fiscal third quarter, while its prior outlook was for $396 million to $398 million. Analysts tracked by FactSet were expecting $397 million.
"Given the state of the macro environment, it is safe to say this is an outcome that hardly any investor (if, in fact, any at all) was anticipating," Mizuho's Gregg Moskowitz wrote in a note to clients.
Evercore ISI analyst Peter Levine wrote that Zscaler's announcement "should bode well for the upmarket enterprise security vendors," calling out Palo Alto Networks Inc. (PANW), which was up 2.5% Monday morning, and CrowdStrike Holdings Inc. (CRWD), up 4.5%.
The company expects calculated billings of $478 million to $482 million, while analysts had been looking for $449 million. The company defines calculated billings as revenue plus the change in deferred revenue and says that the metric "aims to reflect amounts invoiced for subscriptions to access our cloud platform, together with related support services for our new and existing customers."
SVB MoffettNathanson analyst Sterling Auty highlighted that "the upside in billings shows an acceleration from last quarter."
Additionally, Zscaler's management predicts that the company logged $60 million to $64 million in adjusted income from operations for the period, whereas the previous forecast was for $55 million to $56 million.
Zscaler anticipates a $55 million to $59 million GAAP loss from operations for the April quarter. The company didn't give a forecast on that metric initially.
"We had a strong finish to the quarter as the high [return on investment] of adopting the Zscaler Zero Trust Exchange platform continues to resonate with customers and prospects in this challenging macro environment," Chief Executive Jay Chaudhry said in a release.
The company boosted its full-year revenue forecast to $1.587 billion-$1.591 billion from an outlook of $1.558 billion-$1.563 billion previously. Zscaler also now expects $220 million-$224 million in adjusted income from operations, up from a prior forecast calling for $213 million-$215 million.
Zscaler is due to formally report fiscal third-quarter results after the close of trading June 1.
Shares of Zscaler have fallen 14% over the past month and dropped 35% over a three-month span amid pressure on the cybersecurity sector given negative signals from Tenable Holdings Ltd. (TENB) and Cloudflare Inc. (NET).
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 08, 2023 10:43 ET (14:43 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.